Number of EU business bankruptcies at highest level in 8 years

The number of bankruptcy declarations in the EU reached an eight-year high in the second quarter of 2023, statistics agency Eurostat reported last week.

According to the data, the number of companies that ceased operations in the EU between April and June increased by 8.4% compared to the previous quarter. This marked the sixth consecutive quarter of increase in insolvency, Eurostat noted.

Also in this reporting period, the number of businesses declaring bankruptcy reached its highest level since Eurostat started tracking the data in 2015.

Insolvency filings are rising across all sectors of the EU economy, new data shows. However, the biggest increases were recorded in accommodation and food services (up 23.9%), transport and storage (15.2%), and education, health and social activities (10.1%).

Among the 27 EU member states, bankruptcy filings increased the most in Hungary (up 40.8%), Latvia (24.8%) and Estonia (24.6%). The most significant declines in the number of companies facing bankruptcy were recorded in Cyprus (down 48.5%), Croatia (23.6%) and Denmark (15.9%).

Meanwhile, the number of new business registrations across the bloc fell by 0.6% in the reporting period, Eurostat data showed.

Experts say the rise in bankruptcies is due to a general lack of stability and slowing economic growth in the EU. The bloc is struggling with higher interest rates due to rising inflation.

However, some have also pointed out that expired Covid-19 aid packages have artificially kept struggling companies afloat.

“We are now seeing a shake-up in the market,” Christoph Niering, head of the Association of Professional Insolvency Managers in Germany, told the Wall Street Journal. He explained that many of the companies seeking government support were already struggling before the pandemic, and their insolvency would not be surprising given the increased financial and wage costs they now face.

Thomas Humblot, an economist at BNP Paribas, told the Wall Street Journal that the rise in bankruptcies is a “normalization.” He noted that the removal of pandemic-era aid to companies “tends to contribute to an increase in bankruptcies due to the deteriorating economic environment.”

Minh Hoa (reported by Lao Dong, VTV)

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